o1 course package advanced topics in bank risk management€¦ · 2016 alin andrieș, sorin silviu...
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Erasmus+ Strategic Partnership INTQUANT 2014-1-AT01-KA203-001029
Creating an International Semester for Master Programmes in Quantitative Finance
Course Package
Advanced Topics
O1 Course Package
Advanced Topics in
Bank Risk Management
O1/A3 Syllabus IP2 - UAIC
Intensive Programme
Iași, July 2016
Alin Andrieș
Sorin Anton
Cezar Chirilă
Silviu Ursu
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Change History
Version Date Author(s) Changes
0.1 February 29,
2016
Alin Andrieș, Sorin
Anton, Cezar Chirilă
Silviu Ursu
Preliminary version for the
first IP2 announcement
0.2 April 28,
2016
Alin Andrieș, Sorin
Anton, Cezar Chirilă
Silviu Ursu
Content updated based on
feedback from local and
international partners
Assessment criteria and
timetable with the IP activities
added as appendices
Disclaimer
This project has been funded with support from the European Commission. This
publication reflects the views only of the authors, and the Commission cannot be held
responsible for any use which may be made of the information contained therein.
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Content
1. COURSE INFORMATION .............................................................................. 4
2. LEARNING OUTCOMES ............................................................................... 4
3. PREREQUISITES AND CO-REQUISITES ........................................................... 5
4. COURSE CONTENTS ................................................................................... 5
5. RECOMMENDED OR REQUIRED READINGS ..................................................... 6
6. LEARNING ACTIVITIES AND TEACHING METHODS ............................................ 7
7. ASSESSMENT METHODS AND CRITERIA ........................................................ 8
8. ECTS CREDITS AND WORKLOAD ................................................................. 9
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1. Course Information
This course is designed as a pilot intensive programme that is offered in two weeks (10-23
July 2016) within the International Project INTQUANT (Creating an International Semester
for Master Programmes in Quantitative Finance), Funding Scheme: Erasmus+ Strategic
Partnerships (Key Action 2), involving four partner universities - University of Applied
Sciences bfi Vienna (UAS), University of Bologna (UNIBO), University of Economics in
Katowice (UEK) and Alexandru Ioan Cuza University of Iași (UAIC).
The course will be organized by the Faculty of Economics and Business Administration of
UAIC Iași in cooperation with Banca Comercială Română S.A. and will be taught as a
combination of case study, lectures and tutorials offered by the local professors and
distinguished guest experts. Successful accomplishment will provide participants with 6
ECTS that can be acknowledged within the Master programme of each partner University.
The IP venue is the R building of the Alexandru Ioan Cuza University of Iași, located in
Lăpușneanu Street 14, Iași. Lectures will be held in room 402. Laboratories will be
available for the activities within the working teams.
2. Learning Outcomes
General learning outcomes:
At the end of this course, students are able to:
Demonstrate an in-depth understanding of the main types of risks faced by financial
institutions and banks and of the risk models used for their management;
Apply academic knowledge in a practical finance and risk management context;
Analyse situations and scenarios from case studies relating to realistic risk-focus
business problems and strategic and tactical asset allocation at local level;
Higher education institution Alexandru Ioan Cuza University of Iasi
Course Name Advanced Topics in Bank Risk Management
Level of course unit Master (2nd cycle)
Language of instruction English
Type of course unit Compulsory
Mode of delivery Intensive (face-to-face and distance learning)
Year of study 2
Semester of study 4
ECTS credits 6
Contact hours 42
Course coordinator(s) Silviu Ursu, Alin Andrieș, Sorin Anton
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Summarise case findings in a team report, present and defend these in a clear and
effective way;
Assess critically both theirs’ and other teams’ case reports during the presentation
and solutions phase;
Work in an international team environment and develop the ability to formulate and
defend their point of view in a constructive manner;
Use intercultural creativity to achieve an agreed outcome;
Understand how culture affects the work in international teams;
Select appropriate communication tools for international teams.
Specific learning outcomes:
At the end of this course, students are able to:
Apply academic knowledge in a practical bank risk management context;
Identify relevant theoretical course coursework and translate it into solutions for
concrete bank risk management issues;
Demonstrate an in-depth understanding of the institutional details of a company in
the field of banking;
Prepare a set of solutions to a bank risk management case study;
Build a scorecard and use it for credit decision.
3. Prerequisites and co-requisites
Participating students should have a basic understanding of the role, activities, and
sources of risk for banks. Good knowledge of mathematical and statistical concepts for
assessing risks and some basic programming skills are also required.
It is expected that students will demonstrate a general interest in the area of credit risk
management and will seek to develop more practical skills in an international setup.
References and lecture notes will offer background to the topics and will be explored on a
self-study basis and class discussion, both prior and during the onsite phase of the course.
In addition, the business case provided by the industry partner will allow for the application
of the academic knowledge and skills developed in class to real world risk setting. This will
demand analytical thinking, problem solving, as well as the ability to critically assess
current company practices.
4. Course contents
Curriculum-based Introduction in Risk Management
Competence-based -
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The aim of this intensive programme is to introduce participants into the practice of credit
risk management, with an emphasis on credit scoring and scorecard development.
Lending is a major function performed by financial institutions. It involves many different
types of risk, among which the most important one is credit risk. Though the essential
elements of credit risk are still unchanged, financial institutions and investors are facing
credit risk in many different, and often novel, forms. The rapid development makes it hard
for even sophisticated investors, such as financial institutions, to properly understand,
assess, and manage the credit risk involved in their transactions.
The latest global financial crisis has brought to the forefront the need for better credit risk
measurement. The ability to distinguish between good and bad customers represents a
key factor in conducting banking transactions.
Alexandru Ioan Cuza University of Iasi in cooperation with Banca Comercială Română will
offer the intensive programme using the following model for the organization of the course:
Phase 1 (offsite): Preparatory reading and preparation for questions
Phase 2 (onsite): Presence phase during the course (July 10-23, 2016)
The onsite course will start with an introduction given by local and guest academic
lecturers to the required theoretical background in credit risk management and also to R
programming, a tool for the scorecard development process.
This will be followed by an input into a business case supplied by the representative of the
local industry partner - Banca Comercială Română S.A. The aim of the case study is to
build and calibrate a scorecard for individuals.
Intercultural learning will be an integral part of the onsite local course experience. In
addition to the diversity of the case group, consisting of students that will represent each of
the four participating higher education institutions, a local expert will provide an input into
topics such as cross cultural training, intercultural stimulation, cultural awareness training,
and how to work in international teams.
5. Recommended or required readings
Main readings - Credit Risk Management
For the offsite preparation, the following book is mandatory:
(1) Apostolik, R., Donohue, C., Went, P., Foundations of banking crisis: an overview of banking, banking risks, and risk-based banking regulation, John Wiley & Sons, New Jersery, 2009.
The following books provide a comprehensive description of various concepts underlying
credit scoring:
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(2) Anderson, R., The Credit Scoring Toolkit. Theory and Practice for Retail Credit Risk
Management and Decision Automation, Oxford University Press, New York, 2007.
(3) Van Gestel, T., Baesens, B., Credit Risk Management. Basic Concepts: Financial
Risk Components, Rating Analysis, Models, Economic and Regulatory Capital,
Oxford University Press, New York, 2009.
Additional readings on bank risk management
(4) Karas, M., 10 practical steps to build a credit scoring model, Intelligent Risk - April,
2015, pp. 26-32.
(5) Bessis, J., Risk Management in Banking, 3rd edn. Wiley finance series, 2009.
(6) van Greuning, H., Brajovic Bratanovic, S., Analyzing Banking Risk: A Framework for
Assessing Corporate Governance and Risk Management. World Bank Publications,
2009.
(7) Saunders, A., Cornett, M., Financial Institutions Management: A Risk Management
Approach, 8th edn, McGraw Hill, 2014.
(8) Saunders, A., Allen, A., Credit risk management in and out of the financial crisis: new
approaches to value at risk and other paradigms, 3rd edn. Wiley finance series, 2010.
(9) Sironi, A., Resti, A., Risk management and shareholders’ value in banking: from risk
measurement models to capital allocation policies. John Wiley & Sons, 2007.
Additional readings on intercultural learning and case study method:
(10) Lewis, R. (2012). When Teams Collide: Managing the International Team
Successfully. London: Nicholas Brealey Publishing.
(11) Council of Europe (2007). Intercultural Learning in European Youth Work: Which
Ways Forward? Budapest: Directorate of Youth and Sport. Retrieved from
[http://www.coe.int/t/dg4/youth/Source/Resources/Publications/2010_ICL_in_Europe
an_Youth_Work_en.pdf]
(12) Ellet, W. (2007). The Case Study Handbook: How to Read, Discuss and Write
Persuasively About Cases. Boston: Harvard Business Review Press.
(13) Shapiro, B. (2014). Hints for Case Teaching. Boston: Harvard Business Publishing.
Retrieved from [http://hbsp.harvard.edu/he-main/resources/documents/web-
files/M00016_Hints_for_Case_Teaching_Brochure.pdf]
6. Learning activities and teaching methods
This course will be taught as a combination of lectures, additional reading materials, class
discussions, group work and an in-depth case study with a credit risk management focus.
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6.1. Pre-Reading / Offsite Preparation
Participating students will have to prepare themselves on the topic of credit risk
management prior to attending the two-week onsite phase of the course. Specific details
on the required preparatory theoretical readings and the case study developed by the local
lecturer with the industry representative will be provided one month before the start of the
intensive programme. The credits allocation for this phase is 3 ECTS.
Students should have a notion of the basic definitions of credit scoring, scorecard,
probability of default (PD), loss given default (LGD) and recovery rate, EAD (exposure at
default).
6.2. Presence and Onsite Preparation
The onsite course will start with a series of lectures and tutorials given by local and guest
academic lecturers to the required theoretical and methodological background in credit
scoring. The topics will include:
1. Introduction to credit scoring
2. Scoring at different customer stages (application score, fraud score, performance
score, behavioural score, early warning score, collection score, profit score);
3. Score types (score target, counterpart vs. facility score, internal vs. external score)
4. Scorecard development process
5. Limitations
In addition, an introduction to R programming will be offered during the first week of the
intensive programme. The specific content of the preliminary part will be adjusted
depending on the assessment of the participants’ individual offsite preparation.
This will be followed by an input into a case on credit scorecard development supplied by
the representative of the local industry partner - Banca Comercială Română S.A. The local
industry representative together with the lecturers will also provide additional coaching.
Students will be given the opportunity to collect background information on the company
and also ask specific questions about the case.
The second part of this phase will consist of team working on the case. Students will be
organized in international teams of four students, comprising a representative of each
participating higher education institution, and will have to provide their own set of solutions
in a case report. They will present their report on the Friday of the second week. A jury that
includes the industry representative, the university lecturer and the director of the master
programme from the host university will evaluate the report and communicate the final
grade and ranking of participating teams. The credits allocation for this phase is 3 ECTS.
7. Assessment methods and criteria
Students are assessed based on the quality of their work in a group of international
students, clarity of speech and ideas and quality of argument, introduction and conclusion
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in the presentation of their case study report, and also on the clarity of description of main
risk models and accuracy of their application in bank risk management.
Assessment methods consist of:
written examination (25%)
written case study report (50%)
presentation of case study (25%)
The offsite individual preparation based on pre-assigned required readings will be
assessed through a written examination including multiple choice, true-false, short or
extended answers, including essays.
The onsite learning will be assessed through a case study report and its presentation.
Each group will have to deliver a written document containing their solutions set to the
case by the due date, which is Friday of the second week.
Additional information on the assessment method will be discussed during the first onsite
lecture.
In order to pass this IP course, a student must achieve a score of at least 50%.
8. ECTS credits and workload
The distribution of the 6 ECTS credits among specific activities will be based on the
workload students need during the preparatory offsite and onsite phases of the course.
For the pilot intensive programme scheduled in Iasi in 2016, the first partnership-agreed
allocation model will be used: 3 ECTS credits for the first phase of pre-reading/offsite
preparation and 3 ECTS credits for the second phase of presence and onsite preparation.
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APPENDICES
Assessment Methods and Criteria
No Assessment criteria
(based on the course learning objectives)
Assessment
methods
Weight
(%)
1
Clarity of description of the credit risk taxonomy, the
credit products and the credit process
Clarity of explanation of the usage by banks of various
tools to reduce the overall risk of their portfolio
Accuracy of application of a credit analysis
Written test
(individual) 25%
2
Accuracy of application and calibration of a credit
scoring model
Depth of analysis of a business case on credit
scorecard development
Originality of analysis of a business case on credit
scorecard development
Case Report
(group work) 50%
3
Quality of work in a team of international students
Clarity of speech and ideas
Quality of argument, introduction and conclusion in the
presentation of the group report
Oral
presentation
of the case
report
25%
Minimum performance standard
Demonstration of the ability to identify, analyse and interpret relevant information on credit
products, credit process, types of credit risk and tools for credit risk management, to apply and
calibrate a credit scoring model, and to develop a credit scorecard, taking the responsibility for
tasks specific to the role in an international team.
A minimum passing score of 50%, computed as F = 0.25´T +0.50´R +0.25´P , where F – final
grade, T – written test grade, R – group report grade, P – presentation grade.
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TIMETABLE – 10-23.07.2016
Week Date Topic Assignments / Tasks References
- Offsite phase
01.06.2016-
10.07.2016
Credit risk
The credit process and
credit risk management
Compulsory readings
for individual offsite
preparation
(1) Chapters 4 &
5, pp. 79-143.
1 MONDAY
11.07.2016
08:30–12:00
14:00–17:00
R402
08:30–09:00
Registration
09:00–09:15
Welcome & General
Information (Silviu Ursu)
09:15–10:15
Cross-cultural contexts
and added value of
international mobility
(Dorina Moisă)
10:30–12:00
Assessment of Offsite
Preparation
14:00–17:00
Introduction to R
(Christian Cech)
Lecture
(compulsory
attendance)
Written test on
individual offsite
preparation
Lecture and tutorial
(compulsory
attendance)
Lecture and
tutorial materials
will be handed
out in class
1 TUESDAY
12.07.2016
09:00–12:00
14:00–17:00
R402
09:00–12:00
Introduction to R
(Christian Cech)
14:00–17:00
Introduction to R
(Christian Cech)
Lecture and tutorial
(compulsory
attendance)
Lecture and tutorial
(compulsory
attendance)
Lecture and
tutorial materials
will be handed
out in class
1 WEDNESDAY
13.07.2016
09:00–12:00
14:00–17:00
R402
09:00–12:00
Introduction to credit
scoring, scoring at
different customer
stages, score types
(Sorin Anton)
14:00–17:00
Scorecard
development process
(Alin Andrieș)
Lecture and tutorial
(compulsory
attendance)
Lecture and tutorial
(compulsory
attendance)
(3) Chapter 2,
pp. 93-114.
(2) Chapters 17-
19, pp. 355-418.
1 THURSDAY
14.07.2016
09:00–12:00
Scorecard calibration,
Lecture and tutorial
(compulsory
(2) Chapters 20-
26, pp. 419-526.
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09:00–12:00
14:00–17:00
R402
validation and
management issues
(Alin Andrieș)
14:00–17:00
Scorecard
implementation
(Alin Andrieș)
attendance)
Lecture and tutorial
(compulsory
attendance)
1 FRIDAY
15.07.2016
09:00–12:00
R402
14:00–17:00
R407 & R417
09:00–12:00
Presentation of the
case study by BCR’s
representative
(Cezar Chirilă)
14:00–17:00
Preliminary work in
international teams on
the case study
Participation at the
presentation of the
case and discussion
Discussion and contact
with instructors
Case to be
provided onsite
by BCR
2 MONDAY
18.07.2016
R402, R407,
R417, C710
Work in international
teams on the case
study
Team work
2 TUESDAY
19.07.2016
R402, R407,
R417, C710
Work in international
teams on the case
study
14:00–17:00
Progress meeting
Team work
Discussion and contact
with instructors
2 WEDNESDAY
20.07.2016
R402, R407,
R417, C710
Work in international
teams on the case
study
Team work
2 THURSDAY
21.07.2016
R402, R407,
R417, C710
Work in international
teams on the case
study
Team work
2 FRIDAY
22.07.2016
09:00–12:00
R402
09:00–12:00
Assessment of onsite
preparation
Oral presentation of the
case report by
individual teams